HOW TO CALCULATE YOUR NET TOTAL INCOME UNDER INCOME TAX ACT
TaxBlock | Oct 20, 2021 |
HOW TO CALCULATE YOUR NET TOTAL INCOME UNDER THE INCOME TAX ACT
WHAT IS NET TOTAL INCOME?
Net Total Income or Total Income means an income which the taxpayer gets after calculating all the income under all five heads of income and after deducting the Deductions under Chapter VI A.
DIFFERENCE BETWEEN GROSS INCOME AND NET INCOME:
Gross Income is a wider term than Net Income, Gross Income is aggregate income from which you can arrive at Net Income after deducting the Deduction under Section 80C and 80U under Income Tax Act, 1961.
HOW TO CALCULATE YOUR NET TOTAL INCOME?
Net Total Income can be calculated by adding all the incomes of five heads and after that reducing the Deduction under Section 80C and 80U under Income Tax Act, 1961. The format of calculating all the income is as follows:
| PARTICULARS | AMOUNT | ||
| Rs | Rs | Rs | |
| 1. INCOME FROM SALARIES | |||
| Income from salary | xx | xxx | xxxx |
| Income by way of allowances | xx | ||
| Taxable value of perquisites | xx | ||
| Gross salary | |||
| Less: Deduction under Section 16 | xxx | ||
| Entertainment allowance | xxx | ||
| Professional tax | xxx | ||
| INCOME TAXABLE UNDER THE HEAD SALARIES | |||
| 2. INCOME FROM HOUSE PROPERTY | |||
| Adjusted net annual value | xx | xxxx | |
| Less: Deduction under section 24 | xx | ||
| INCOME TAXABLE UNDER THE HEAD HOUSE PROPERTY | |||
| 3. INCOME FROM BUSINESS OR PROFESSION | |||
| Net profit as per profit and loss account | xx | xxxx | |
| Add: Amounts which are debited to P&L a/c but are not allowed as a deduction under the act | xx | ||
| Less: Expenditure which are not debited to P&L a/c but are allowed as a deduction under the act | xx | ||
| Less: Income which are credited to P&L a/c but are exempt under section 10 | xx | ||
| Add: Income which are not credited to P&L a/c but are taxable under this head | xx | ||
| PROFIT & GAINS TAXABLE UNDER THE HEAD BUSINESS & PROFESSION | |||
| 4. INCOME FROM CAPITAL GAINS | |||
| Amount of capital gains | xx | xxxx | |
| Less: Amount exempt under sections 54, 54B,54D,54EC,54F, 54G, 54GA, 54GB, and 54H | xx | ||
| INCOME TAXABLE UNDER THE HEAD CAPITAL GAINS | |||
| 5. INCOME FROM OTHER SOURCES | |||
| Gross Income | xx | xxxx | |
| Less: Deduction under section 57 | xx | ||
| INCOME TAXABLE UNDER THE HEAD OTHER SOURCES | |||
Total [i.e., (1) +(2) +(3) +(4) +(5)] | XXX | ||
| Less: Adjustment on account of set-off and carry forward of losses | XXX | ||
| Gross total income | XXXX | ||
| Less: Deductions | XXXX | ||
Total Income or Net income | XXXX | ||
WHY IT IS IMPORTANT TO CALCULATE NET TOTAL INCOME?
The total direct effects upon the tax which shall be paid by the taxpayer. Tax is to be calculated on the Total Income or Net Total Income and not to be calculated on Gross Total Income. So, the calculation of Total Income is really important as it decides the payment of tax. It shall not be either higher or lower than the real amount if in case it is then there will two consequences which is all follows:
1. In case the amount of Total Income is calculated higher than the actual amount then the taxpayer will be end paying higher amount of tax then actually what shall be paid by him. Then at the time of filing returns he can claim refund for the excess paid amount.
2. In case the amount of Total Income is calculated lower than the actual amount then the taxpayer will be end paying lower amount of tax then actually what shall be paid by him and it will be liable for penalties, notices and prosecution.
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